COMPONENTS AND DETERMINENTS OF IBE

DETERMINENTS OF IBE

DETERMINENTS
TRADE COUNTER TRADE CONTRACTUAL ENTRY MODES

FDI

TRADE

DIRECT AND INDIRECT EXPORT

IN DIRECT EXPORT A COMPANY TAKES FULL RESPONSIBILITY FOR MAKING ITS GOODS AVAILABLE IN THE TARGET MARKET BY SELLING DIRECTLY TO THE END-USERS. INDIRECT EXPORT TAKES PLACE WHEN THE EXPORTING COMPANY SELLS ITS PRODUCTS TO INTERMEDIARIES, WHO SELL THE SAME PRODUCTS TO THE END USERS IN THE TARGET MARKET.

COUNTER TRADE
COUNTER TRADE IS A SORT OF BILATERAL TRADE WHERE ONE SET OF GOODS IS EXCHANGED FOR ANOTHER SET OF GOODS.COUNTER TRADE IS CLASSIFIED BROADLY AS:-

COMMERCIAL COUNTER TRADE INDUSTRIAL COUNTER TRADE

GROWTH OF COUNTER TRADE

THE SHARE OF COUNTER TRADE IN THE WORLD TRADE ROSE FROM AROUND TWO PERCENT IN 1964 TO 20-30 PERCENT BY THE LATE 1980S (DEBROY, 1987), ALTHOUGH ACCURATE ESTIMATES CANNOT BE MADE ON ACCOUNT OF UNAVAILABILITY OF FIGURES.

MERITS OF COUNTER TRADE

ABSENCE OF TARIFF BARRIERS STABILISATION OF EXPORT EARNINGS. SCOPE FOR BENEFITS FROM TRADE DIVERSIFICATION POSSOBILITY FOR FLOW OF TECHNOLOGY. ESPECIALLY IN BUY-BACK AGREEMENTS. SOME ADVANTAGES SIMILAR TO THOSE OF LOANS NO NEED FOR FOREIGN EXCHANGE FOR MAKING IMPORTS. AVOIDING DISTORTIONS CAUSED BY UNSUITABLE EXCHANGE RATE POLICY.

DEMERITS ARE

NON-CONFORMING WITH THE NORMS OF THE MULTILATERAL RTADING SYSTEM. ABSENCE OF MULTILATERAL SURVEILLANCE LEADING TO DISTORTIONS IN MARKETS AND PRICE. LACK OF ENCOURAGEMENT FOR QUALITY IMPROVEMENT BALANCING OF TRADE SOMETIMES TURNS DIFFICULT.

CONTRACTUAL ENTRY MODES

CONTRACTURAL ENTRY MODES ARE FOUND IN CASE OF INTANGIBLE PRODUCTS SUCH AS TECHNOLOGY, PATENTS AND SO.ON. WHEN A COMPANY DEVELOPS A PARTICULAR TECHNOLOGY THROUGH ITS OWN RESEARCH AND DEVELOPMENT PROGRAMME, IT LIKES TO RECOVER THE COST OF RESEARCH AND DEVELOPMENT. TO THIS END, IT SELLS THE TECHNOLOGY EITHER TO A DOMESTIC FIRM OR TO A FOREIGN FIRM.

TECHNICAL COLLABORATION NORMALLY TAKES FOUR FORMS:

LICENSING FRANCHING MANAGEMENT CONTRACTS TURNKEY PROJECTS

FOREIGN PORTFOLIO INVESTMENT AND FDI

FOREIGN PORTFOLIO INVESTMENT IS AN INVESTMENT IN THE SHARES AND DEBT SECURITIES OF COMPANIES ABROAD IN THE SECONDARY MARKET NEARLY FOR SAKE OF RETURNS AND NOT IN THE INTERESTS OF THE MANAGEMENT OF THE COMPANY. FOREIGN DIRECT INVESTMENT IN FORM OF GREEN-FIELD INVESTMENT IA AN INVESTMENT IN THE EQUITY CAPITAL OF A COMPANY ABROAD FOR THE SAKE OF MANAGEMENT OF THE COMPANY OR INVESTMENT ABROAD THROUGH OPENING OF THE BRANCHES.

M&A

M&A ARE EITHER OUTRIGHT PURCHASE OF A RUNNING COMPANY ABROAD OR AN AMALGAMATION WITH A RUNNING FOREIGN COMPANY.

FORMS OF M & A

BASED ON CORPORATE STRUCTURE - ACQUISITION - AMALGAMATION/CONSOLIDATION BASED ON FINANCIAL REKLATIONSHIP - HORIZONTAL - VERTICAL - CONGLOMERATE BASED ON TECHNIQUE - HOSTILE - FRIENDLY

INTERNATIONAL ECONOMIC GROWTH AND BE, LATEST WORLD TRADE TRENDS.

IN THE WAKE OF INDUSTRIAL REVOLUTION IN EUROPE, THE CHARACTER OF INTERNATIONAL BUSINESS CHANGED. INTERNATIONAL ENTERPRISES CAME TO BE ENGAGED IN EXTRACTING, PROCESSING, AND TRANSPORTING RAW MATETRIAL FOR INDUSTRIAL PLANTS LOCATED IN THE HOME COUNTRY AND ALSO IN EXPORTING THEIR MANUFACTURED GOODS BACK TO THE RAW MATERIAL PRODUCING COUNTRIES.

RECENT TRENDS
ITEM VALUE OF CURRENT PRICES(US $ BILLION) ANNUAL GROWTH RATE (%)

1990 FDI INFLOWS FDI OUTFLOW FDI OUTWARD STOCK CROSS-BORDER M&As SALE OF FOREIGN AFFILIATES ASSETS OF FOREIGN AFFILIATES EMPLOYMENT IN FOREIGN AFFILIATES (MILLION) 209 245 1716 151 5503 5706 23.6

2000 1271 1150 5976 1144 15680 21102 45.6

2005 916 779 10672 716 22171 45564 62

1991-95 20 15.7 10.7 23.3 10.4 13.7 5

1996-2000 40.2 35.7 16.8 51.5 10.9 19.2 14.2

2001-05 -4 -5.1 10.1 2.2 13.6 15.8 6.5

SOURCE:- UNITED NATION, WORLD INVESTMENT REPORT, VAROIUS ISSUES.

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